Saturday, 19 July 2014

Financial Tips Corliss Group Online Magazine: Essential Money Tips for New College Grads

Graduation is the theme all around my neighborhood. It is
a time of excitement and big dreams. Unfortunately in most cases, personal
financial sense is not a taught at college.

Once out of college, going from living broke to a big
paycheck every month can easily encourage lifestyle inflation and a downward
spiral of bad financial habits. Hence, it is essential to establish a good
personal finance foundation to avoid getting trapped in a lifetime of debt.
Here is a checklist I would hand over to a new graduate to make sure they start
on the right path.

Earn

Learn to network efficiently:
Invest time in networking. Learn about your colleagues. Find a mentor and build
relationships at every level, both above and below yours.

Start a case study
file: By "case study file," I mean make a list of all your
accomplishments rather than a list of projects you worked on. For example: Cut
20 percent of production costs while maintaining the same product quality.
Include information on which project and what you did to achieve that. This
will be of great use in many situations like an annual review, a salary
negotiation or a new job search. In addition, keep your resume updated at all
times.

Promote your
personal brand: As a job candidate, 86 percent of potential employers will
look at your social profiles, so spend some time cleaning up all your social
media profiles.

Spend

Create a budget:
You might feel like you are flush with cash going from a student's pay to a
full-time-job's pay. Create a
budget even before you get your first paycheck. Continue as much as
possible to live like a student and set money aside for your future goals.

Save

Pay yourself first:
The first bill you should pay each month should be to you. Before you pay for
your groceries, before you pay your mortgage, before you do anything else, put
money aside in your savings. Most people will wait to pay all the bills and
save the money left over. It is fine in theory, but the problem is there is
almost never anything left over. If you pay yourself first, even if it seems
impossible initially, you will learn to live with what is left over. This way
you will always spend less than you earn.

Borrow a book or
two on finances: Knowledge is power. Arm yourself with as much personal
finance knowledge as possible. I recommend "I Will Teach You to be
Rich" by Ramit Sethi, if you are just starting out.

Start an emergency
fund: Establish a rainy day fund as soon as possible. Start with $1,000 to
cover small emergencies, then move on to saving 'X' number of months' expenses
to make sure a sudden job loss or illness won't put you in debt.

Think five and ten
years ahead: Right now your 20-year-old self might say that you are never
going to get married or you will always be renting. But in five or ten years,
it is very likely you would have changed your mind completely. Do yourself a
favor and start saving for standard goals anyway -- a wedding, down payment for
a house, or your dream vacation. If you don't end up spending money on a
wedding, you can always reallocate it to another goal.

Invest

Get started today:
Time is the most powerful ally when it comes to investing. Many people keep
waiting to learn everything about investing to start. Don't get stuck on debate
minutiae. Get started with some basic, low expense, index funds -- total stock
market or life-cycle funds. As you learn more about investing, you can adjust
them accordingly.

Don't pass up free
money: If your company offers a 401(k) plan, especially with matching
funds, take full advantage of it. Sign up to contribute the maximum. That way
you will never see the money in your wallet, you won't miss the money, and you
won't be tempted to spend it.

Borrow

Manage your debt:
If you have student loans or credit card debt, pay them off aggressively,
starting with the highest interest rate loan.

Avoid consumer
debt: I do not believe credit cards are evil, but they are not for
everyone. Understand the pros and cons of credit cards. Do not buy things you
cannot afford. If you want something, save for it.

Build your credit:
Unless you are determined to pay everything in cash, you need decent credit to
get a good interest rate on your loan, whether a car loan or a mortgage. Even
if you are in the cash camp, it is still a good idea to maintain a great credit
score as it is now used by utility and insurance companies to give you
preferred rates.

Protect

Insure adequately:
When you are in your 20s, you might feel invincible and be tempted to skip
health insurance to save money. Don't! Accidents happen, and so do sudden
illnesses. If your company offers health insurance, that is most likely the
cheapest option. If you are under 26, you can also check the cost of insurance
as a dependent on your parents' plan. If you are single with no dependents, you
probably don't need life insurance, unless you have a loan that someone else
co-signed for, if that is the case, insure yourself at least to cover that loan
amount.

Nobody cares more about your money than you do. By
setting up a good financial foundation, you are setting yourself up for
success.